African Energy Outlook

Nigeria slips into recession as Q2 oil output slumps

Nigeria slipped into recession, as its oil output slumped to 1.69 million b/d in the second quarter of this year due to renewed militancy in the Niger Delta, according to data released August 31 by the National Bureau of Statistics.

Nigeria, which was Africa's largest oil producer until a few months ago, saw its economy shrink by 2.06% in Q2, as the impact of militant attacks on oil facilities weighed on the country's economy.

Nigeria's economy also shrank in the first quarter of this year, by 0.36%, making it two consecutive quarters of declining growth, the common definition of recession.

The sharp drop in oil production has severely hurt Nigeria's economy, already weakened by the slump in global oil prices, with the government struggling to implement the 2016 budget that was based on a 2.2 million b/d production assumption.

Oil accounts for about 90% of Nigeria's foreign exchange earnings and about 80% of the government's total revenue.

The economy shrunk on the back of its oil output which fell to 1.69 million b/d in Q2 this year, down by 360,000 b/d or 17.5% compared with the same period last year. The Q2 output figure was also down by 420,000 b/d or about 20% from the previous quarter of this year, the data showed.

Attacks on the country's oil and gas infrastructure have slashed production to around 1.5 million-1.6 million b/d currently from 2.2 million b/d earlier in the year.

"As a result, real growth of the oil sector was negative 17.48% (year on year) in the second quarter of 2016. Growth declined by 10.68 percentage points and 15.59 percentage points relatively to growth in the second quarter of 2015 and first quarter of 2016 respectively," the bureau stated.

Four of Nigeria's main export crude grades -- Qua Iboe, Bonny Light, Brass River and Forcados -- are currently on force majeure, with more than 700,000 b/d of production affected.

The government approved an oil price benchmark of $42.50/b at a production assumption of 2.2 million b/d for the purposes of revenue calculation in its 2017 budget.